By
Scott Armstrong, Business correspondent of The Christian Science Monitor /
October 20, 1981

Boston

The cardboard-bound green book in the Massachusetts Port Authority office wouldn't thrill plot-hungry readers on a rainy night. But the numbers and notations scrawled inside reflect how a once great seafearer has fallen from dominion.

For in it, as in dusty logbooks at shipping ports around the world, are listed the names of nations that today haul goods over the ocean lanes: Liberia, Greece, Panama, Germany, Singapore, Algeria . . . and, occasionally, the United States.

Once a commercial armada of the high seas, the US merchant marine is floundering. Thrashed by foreign competition and bound by near-clipper-era regulations, America's shippers and its commercial shipbuilding industry are making desperate appeals for government help to stay afloat in the world marketplace.

The Reagan administration, which has said it wants to rescue the maritime industry, is being forced to take up at least three challenges to US interests:

* Rising demands from developing countries, trying to build up their own fleets by controlling which vessels carry their resources.

* Complaints from other shipping nations that US antitrust policies for American ocean carriers - designed to prevent rate-setting abuses - go against the international practice of controlling the markets of regular maritime routes.

Any government action, however, must also deal with a world shipping market now trying to shake itself out of a prolonged slump. After being hit broadside financially in the 1974 oil crisis, the industry has been struggling, in fits and starts, to lift itself out of the doldrums. Although better off today, it's far from healthy.

Operators of liners (regularly scheduled cargo runs) have seen aggressive rate assaults from East European and Far Eastern companies, slashing the earnings of many Western shippers. Tanker freight rates remain low, caused mainly by a surplus of oil carriers, which are being scrapped faster than post-Halloween pumpkins. Brisk demand for imported coal and grain, however, has helped the balance sheets of dry bulk shippers over the past year.

''The year 1980 was another difficult one for international seaborne trade and world shipping. Falling oil demand and too many orders for dry bulk carriers make a gloomy outlook for Western shipowners,'' concludes the Organization for Economic Cooperation and Development in a maritime review.

Just where the United States will fit into the future shipping scene remains uncertain. For now, the country's once opulent maritime industry is waiting to see what remedies the Reagan administration may come up with.

''The maritime industry is at a very weak level right now,'' a US Maritime Administration official says. ''There are a lot of signs it could flip into oblivion if some kind of positive action is not taken.''

Not all is a bare cupboard for the US industry, of course. Demand for offshore oil drilling equipment, supply boats, tugs, and barges is robust. Dizzyingly high projections for future coal consumption is handing the world's ocean merchants - the US included - the biggest opportunity since the days of cheap oil. And the nation's inland waterways, from the mud-frothed Mississippi to the choppy Great Lakes, are teeming with more cargo-laden vessels than ever before.

By the year 2000 the amount of oil, grain, iron ore, and other goods moving on the nation's rivers and canals is expected nearly to double.

But two mainstays of the industry, the construction of oceangoing merchant ships and the US-flag merchant marine, have dwindled.

Once some of the busiest in the world, the nation's shipyards are virtually stagnant, except for orders from the US Navy. Japan reigns as the world's No. 1 commercial shipbuilder, while more and more new cargo-carrying vessels are floating out of yards in South Korea, Taiwan, Brazil, and Spain. At the end of 1980 Japan held 38 percent of the world's orders for commercial ships, compared with 7 percent for South Korea, 6 percent for Spain, and 5 percent each for Brazil and the United States, according to maritime administration figures.

Given the Reagan administration's defense push, it will be a feast for many of those winning Navy orders in the years ahead and famine for those who don't. Right now more than half of the nation's 120,000 shipyard workers are working on defense orders.

''Those yards in the commercial building area have a very difficult task ahead of them,'' says John T. Gilbride, chairman and chief executive officer of the Todd Shipyards Corporation, which now does only Navy work and has a four-year backlog of orders. ''Unless the government steps in and does something , you're going to have the layoff of some 30,000 shipbuilders.''

For the US-flag merchant fleet, the challenge is no less daunting. Today less than 5 percent of all goods leaving or entering US ports is carted on US-flag ships, although the percentage has been less than 10 percent for more than two decades. US carriers, however, control a healthy 26 percent of the world's liner traffic. The country's privately owned and operated fleet is made up of about 570 ships, ranking it 11th in the world. In cargo-hauling capability, the US ranks eighth.

Industry officials have long argued the US has become perilously dependent on other countries to haul supplies of critical raw materials, leaving the country vulnerable to a world often politically liquid and financially stormy. What's more, the average age of the US-flag vessels is 17 years - well above the 12 -year average of the world's fleets.

''The US ships are among the world's oldest,'' says George E. Economakis, managing director of the Hellenic Marine Consortium SA in Piraeus, Greece. ''The US fleet is dying, and the amount of money needed to subsidize its recovery is just not there.''

If the size of the US-flag fleet is dwindling, the Soviet fleet isn't - a fact that makes many Western defense experts squeamish. Today the Soviet merchant marine has five times as many ships as the US-flag fleet, although in carrying tonnage the two countries are about even. By offering bargain-basement rates, the heavily subsidized Soviet fleet has been able to grab a hefty chunk of the world shipping trade.Perhaps the fastest-rising shipping country is the People's Republic of China. Its aged fleet and largely primitive cargo-handling capability pose little commercial threat to world shippers now. But some analysts think it will be only a matter of years before the country grabs a large share of world trade. Determined to reduce spending on foreign-chartered ships, the Chinese are snapping up foreign vessels, mostly secondhand, and are working to oil its creaky shipbuilding industry. The results so far are impressive: In the last 10 years, the cargo capacity of its fleet has jumped from 2.3 million deadweight tons to more than 10 million tons. Chinese-controlled vessels now number more than 690. ''The Chinese will become a power in international shipping,'' says Irwin M. Heine, former chief economist with the US Maritime Administration, who is writing a book on China's merchant marine. Many developing countries are jostling for a larger share of maritime trade. Their demands have led to numerous tugs of war with the industrialized powers over cargo rationing and control of merchant fleets. One of the more vitriolic disputes, over flags of convenience, reached a head earlier this year when the United Nations Conference on Trade and Development (UNCTAD) voted to phase out the practice of shipowners registering their vessels under foreign flags. Such ''open registry'' countries offer tax shelters and access to cheap labor for many of the world's shipowners, including a good number from the US. Some of the traditional opponents of flags of convenience - seafearing unions and much of the developing world - see the UNCTAD initiative as the first step in a long, painful process in hauling them down. Others argue that the battle will grind on for years. About a quarter of the world's merchant fleet now operates out of flag-of-convenience countries, mainly Liberia, Panama, and Honduras. Backers of open registries have long argued they would go belly up if they couldn't sail under foreign flags. Richard Orr, administrative manager of Exxon International's tanker department, estimates that to man an average-size tanker with a 25- to 30-member Filipino or Korean crew would cost $600,000 a year; with US seamen the bill would reach $2.5 million.''The fact is, the US has been pricing and regulating itself out of the maritime business for the past 30 to 40 years,'' Mr. Orr says. ''All we're seeing today is a continuation of that trend.''Third World nations see flags of convenience as hampering the development of their own fleets. They have an ally, in spirit at least, in US maritime boosters, who have long complained that fewer American hands are on deck as a result of the open registries. US shippers have also been buffeted by other nations which reserve parts of their international commerce for their own shippers. The most far-reaching example of this is the still-unratified UNCTAD liner code, which calls for 80 percent of the cargo between two countries to be hauled by those two countries' ships. The remaining 20 percent would be open to third parties, or ''cross traders,'' which haul a large chunk of world tonnage. Because American ports are open to all traders, many of the US maritime backers worry that adoption of the code will send the world's cross traders, closed out of their traditional markets, steaming into US ports offering bargain-basement rates. They have been urging the Reagan administration to outline a policy that will protect US shipping interests through bilateral agreements with countries.An interagency team of White House and Cabinet representatives has begun to shape recommendations for a maritime policy. The dilemma for the austerity-minded administration is how to prop up the merchant marine and shipbuilding sector without more federal subsidies (doled out to help make US shipping competitive with foreign operators) and without shattering the traditional Republican penchant for free trade. Some $2.2 billion in direct federal aid has been given to the industry in the last four years.Some of the more traditional alternatives include reserving certain types or amounts of cargo for hauling on US-flag ships (for instance, coal); greater tax breaks for the industry; and bilateral trade agreements divvying up cargo hauling - all of which have been broached in the past and have drawn thunderclaps of opposition from various nonshipping (and even some shipping) interests. ''What we're trying to do is figure out how, on a no-cost basis . . . , we can increase our share of the world's shipping,'' said Drew Lewis, secretary of the Department of Transportation, in a telephone interview.''Although I'm for free trade and a free-enterprise system and all those other good things, I also recognize that if you expect to have any capability in terms of . . . military preparedness, which could be a need at some point in the future, we're going to have to be in a position where we have a stronger fleet than we presently have.'' One test of what the administration might do in aiding the industry is coming in the area of regulatory relief. Congressional efforts are under way to grant sweeping antitrust immunity to US-flag shippers involved in foreign trade. One of the broadest versions, introduced by Sen. Slade Gorton (R) of Washington, chairman of the Senate merchant marine subcommittee, would widen the role US-flag carriers could play in international rate-fixing conferences. As it is now, American carriers are allowed to take part in open shipping conferences where freight rates are set. But, reflecting antitrust traditions, they have not been able to take part in conferences that exclude new carriers. Senator Gorton's bill would allow them to take part in the closed conferences, a practice common in non-US trades. The administration, which has yet to support the Gorton bill, is searching for a compromise that would overcome the opposition of Justice Department antitrust officials.